‘Huge appetite’ for digital-only banks as another player steps up

With South Africa’s high number of unbanked customers, the country’s newest low-cost branchless bank − Be Mobile Africa − should harness the endless possibilities offered by the huge consumer appetite for digital-only banking services.

That’s according to research firms Africa Analysis and IDC, who believe that intensifying competition in South Africa’s digital-only banking space is healthy for the financial services industry, and good for the economy, too. financial inclusion in a country where cash is still king.

Analysts say digital-only banks – or neo-banks as they are also known – are becoming increasingly attractive in South Africa, due to their approach of delivering innovative solutions at scale without the frictional processes of banks. traditional retail.

Canadian neo-bank Be Mobile Africa, which will officially go live tomorrow in South Africa, told ITWeb it targets the estimated 23.5% of unbanked South Africans and dozens of underserved South Africans. that are not supported by traditional banks.

The high number of unbanked residents leaves an estimated R12 billion in cash floating outside the formal banking system.

Dr Cédric Jeannot, CEO and co-founder of Be Mobile Africa, is betting on the bank’s low-cost business model, which he says is cheaper than competitors’ rates.

The bank, he adds, has gained ground in the 30 African countries where it operates, including Kenya, Nigeria and Togo.

Opening a Be Mobile Africa account will allow customers to hold, send and receive funds in multiple currencies, including USD and EUR, the bank says.

“Our main competitive advantage is our technology, which allows us to offer customers faster turnaround times, cheaper than competitor rates, and in-app accessibility.

“Although traditional banks are trying to reach and integrate the unbanked population, their legacy technology and systems are hampering their efforts. We have an accessible and affordable solution; so for us, it was a no-brainer to enter the South African market,” explains Jeannot.

Transfers via Be Mobile Africa are instant and free between its users. For collection and withdrawal transactions between Be Mobile Africa and non-Be Mobile Africa customers, individuals will have to pay fees depending on the partner used, with fees charged by the partner but no additional fees are charged by Be Mobile Africa.

Users will pay fees on value-added services, such as currency exchange services and future lending services. The bank says its savings product has some of the highest interest rates in the world – offering 5% interest per annum in USD and EUR.

According to Finder Neobanking Adoption ReportDigital-only banking is set to explode in South Africa, with almost a quarter (24%) of South African adults surveyed expected to do business with a branchless bank by 2023.

Over the past three years, the retail banking industry in South Africa has been revolutionized by the rise of digital-only banking, with the launch of TymeBank, Discovery Bank and Bank Zero.

The main differentiator of these new branchless banks is that they provide competitive competition in the local banking sector, thanks to agile offers and reduced costs.

This has seen traditional banks accelerating their digital strategies and aggressively repositioning their platform-based model, to offer their customers innovative financial products and services.

TymeBank has amassed five million customers in its three years of existence, with more than 100,000 small businesses.

Discovery Bank says it has seen strong growth since its public launch in 2020, bringing together more than one million bank accounts, held by more than 470,000 customers. In October, Bank Zero told ITWeb that it had seen a rapid increase in customer registrations, although its numbers were not disclosed.

Andre Wills, MD of Africa Analysis, points out that while competition in the local market is intense, the growth of existing branchless banks demonstrates that there is an appetite for using these services.

“Fully digital banks enable the unbanked population to access banking services. This is a significant benefit as it creates financial inclusion for this group of people who then benefit from a wide variety of banking and payment services.

“Branchless banks are able to serve any customer, anywhere, 24 hours a day, provided there is some form of connectivity (e.g. banking apps on mobile phones) .”

The factors that will play a crucial role in the growth of Be Mobile Africa, Wills adds, are: a service differential to demonstrate why it offers better service; the education of its target around the offers; establish a relationship with agents/ambassadors who will assist customers, especially in rural areas; and build relationships with businesses in the microfinance services industry.

Jon Tullett, associate research director at IDC, believes that South Africa and the whole of sub-Saharan Africa are good markets for branchless banks because they are able to reach a wider range of customers, by delivering innovative financial solutions at scale without the clutter of existing infrastructure. .

Jon Tullett, associate research director at IDC.

Jon Tullett, associate research director at IDC.

“This combination of agility and scale means achieving a lower cost of doing business and therefore being able to reach a wider set of customers, not excluding the possibility of introducing high value-added services alongside them” , explains Tullett.

“Be Mobile takes a relatively simple approach, targeting specific customer needs (mobile access and cross-border exchanges) to get started; undoubtedly, the product portfolio will grow over time. It’s a Canadian company making a platform game, so I would expect that to be the strategy.

Referring to the challenges ahead, he cautioned that customer acquisition is a challenge in the banking industry because even when a bank has an innovative product to sell, it comes up against strong brands with huge market awareness; carving out a niche therefore requires a clear value proposition.

“Also, regulation and compliance aren’t areas where you can cut corners, so the overhead of the banking process applies to everyone, digital or otherwise,” Tullett adds.

Comments are closed.